Brewers fear duty rise will damage a dynamic sector

06-Sep-2010 - Last updated on 13-Mar-2017 at 13:13 GMT

Black Sheep brewery

 The government’s alcohol taxation review could spell bad news for the brewing industry, with a further rise in alcohol duty on the cards. 

Brewers complain that the duty on beer has already risen by about 25% over the past two years. But, warned Meantime Brewing Company's marketing director Peter Hayden: "The government is always going to raise duties because they are a soft target."

For government, a rise in duty on booze would have the dual merits of raising much needed extra cash while meeting calls from the medical lobby, which claims it would reduce spiralling alcohol-related illness and anti-social behaviour through price controls.

According to Hepworth & Co Brewers' md Andy Hepworth, beer duty alone raised £3.3bn over the past year. But, he warned: "The government is reaching a point of diminishing returns. They should take a look at the Irish model where they reduced duty on alcohol and actually collected more revenue."

Hayden added: "Increasing duty results in less cash intake; beer is no longer a government cash cow. [Raising duty] doesn't change drinking habits, it only hurts small businesses."

Black Sheep Brewery's joint md Paul Theakston concurred: "They're killing the goose that lays the golden egg. Every time they raise duty, it flattens demand and demand is already flat."

Progressive beer duty

Another fear, especially for smaller brewers, relates to rumours about changes to and possibly an axeing of the Progressive Beer Duty (PBD), a form of relief that allows smaller breweries those producing less than 60,000 hectolitres (hl) a year to benefit from cuts in duty of up to 50%, depending on their size.

In 2002, before PBD came into effect, there were about 300 microbreweries. Since then the number has more than doubled to over 700, said The Society of Independent Brewers' chief executive Julian Grocock.

"Cutting PBD would be disastrous," said Hayden. "Brewing is unlike any other food manufacturing in terms of scale; the bigger producers have a much bigger advantage over smaller companies and taking PBD away would take away the level playing field." Grocock added: "If any changes were made, small brewers would go out of business."

However Theakston claimed that breweries just over the PBD threshold were disadvantaged compared with their smaller competitors. And Hepworth added that because of PBD "we have too many breweries now".

He claimed PBD was diluting the quality and price of beer. "It's one of the reasons why big breweries are complaining," he added.

Most breweries, including Black Sheep, would like to see the upper threshold rise to the EU maximum of 200,000hl. Theakston would also like breweries of all sizes to benefit from PBD.

But Hepworth would like to see a lowering of the 50% duty mark, from a lower threshold of 5,000hl down to 2,500hl, for all.